Small business concerned about ‘underground regulations’

Small businesses say they are concerned by the rise of so-called underground regulations.

The National Federation of Independent Business (NFIB) released a report Tuesday documenting rules from federal agencies that they say evade public scrutiny.

The Environmental Protection Agency, Department of Labor, Occupational Safety and Health Administration (OSHA) and Equal Employment Opportunity Commission (EEOC) along with other federal agencies are guilty of quietly issuing underground regulations, the report alleges.

“With the rise of the Fourth Branch, public policy is increasingly set by unelected bureaucrats, under the political direction of only the President,” the NFIB wrote.

“The agencies know that they don’t have to undertake the formal process of drafting and then approving a new regulation in order to coerce the regulated community,” explained Karen Harned, executive director of the NFIB’s Small Business Legal Center. “They merely have to imply the threat of litigation or enforcement action regardless of whether the rule exists in law or regulation.”

By law, federal agencies must go through a public vetting process before issuing major rules. 

First, they issue a proposed rule to provide the public with an opportunity to review the regulation and comment on the changes. Only after they review those comments can they move forward with a final rule. In some cases, this can take years to complete.

To speed up the process, many agencies also issue informal guidance policies and interpretative statements. These documents do not carry the same weight as a formal rulemaking, but compliance is strongly encouraged.

The NFIB argues these informal recommendations are used to bully and threaten small businesses without going through the formal rulemaking process.

The NFIB pointed to the National Labor Relations Board’s recent joint employer decision as an example. The board ruled that companies can be held liable for labor violations committed by their business partners. 

“In another example, the EEOC’s 2012 Enforcement Guidelines warned employers that they could face civil rights charges for running credit checks on prospective workers,” the NFIB wrote. “The commission backed it up with enforcement action against a company for doing just that.”